If you believe that the LM curve is vertical, what type of policy would you recommend to stimulate the economy?
A) An increase in government spending
B) A reduction in government spending
C) An increase in the money supply
D) A reduction in the interest rate
C
You might also like to view...
If 1 US dollar costs 1.25 Euros, then 1 Euro must cost _____ US dollars
a. 0.5 b. 0.8 c. 1.0 d. 1.25 e. 1.5
The situation in which one party to a transaction takes advantage of knowing more than the other party to the transaction is known as asymmetric information
Indicate whether the statement is true or false
A simultaneous increase in demand and decrease in supply would lead to:
a. An increase in the equilibrium price and a decrease in the quantity sold b. An increase in both the equilibrium price and the quantity sold. c. A decrease in both the equilibrium price and the quantity sold. d. An uncertain effect on the equilibrium quantity but an increase in the equilibrium price.
By what mechanism does the economy always return to full employment after a demand shock in the short run?
a. Wages automatically adjust themselves. b. The interest rate automatically adjusts itself. c. Prices automatically adjust themselves. d. Taxes automatically adjust themselves. e. Rents automatically adjust themselves.